There's Something About Rajesh
emember Al Gore? Former vice president of the USA in the Clinton administration and long considered front runner to be the next president? For whatever reasons, he never made it. As he once famously quipped, “I am Al Gore, and I used to be the next president of the United States of America.” This may sound uncharitable, but it is difficult to miss the parallels between Gore and Rajesh Reddy.
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Image: Gireesh G V
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At the peak of the dotcom boom in 1999, he hit the headlines as the next big Indian thing. Unimobile, a company he founded, had five million users across 130 countries using the mobile messaging system he built. “There were bidding wars, people were literally pounding our doors to invest in us,” Reddy recollects. And then, inexplicably, Unimobile imploded.
But not before Reddy learnt a few lessons: Senior management must know how to withstand investor pressure without compromising strategy; success takes time. Next, he teamed up with Ashok Narasimhan, founding president at Wipro, and launched July Systems in 2001 to build a “wireless superstructure” — the Holy Grail for telecom companies.
When completed, it would allow them to deliver any kind of content practically to any mobile phone using any possible business model anybody could think of. With Narasimhan as the CEO in Silicon Valley and Reddy as president in Bangalore, July Systems raised $8 million in funding from respected VCs like Westbridge Capital (now Sequoia India) and Acer Technology Ventures even before a single line of code had been written.
Since then, most of July System’s original backers quit. There came a time when investors wanted the company sold off to recoup their investments. Worse, most telecom companies wouldn’t touch the “wireless superstructure” with a barge pole. And Reddy has scrambled to put a new model in place.
But you got to give it to the man. He retains the spunk he started out with. He continues to learn from his mistakes. But most importantly, he has just reported his first cash profit, 13 years after he started out as an entrepreneur.
If you don’t succeed twice…
When July Systems started out, Reddy spent the better part of two years developing its software from scratch. To recover the cost of development, he needed to price the product high — as high as $1 million per customer. To sell at these prices, he needed offices and expensive talent. So July opened bases in 10 countries and hired as many senior executives.
Two years down the line, Reddy realised July’s customers could be counted on his fingers. Two reasons: One, most telecom operators like to closely control the access to customers of value added services (VAS) on their networks. That’s because in mature markets, revenues from VAS contribute as much as 25-30 percent to an operator’s revenues. Reddy’s model allowed third-party applications and content find their way to customers directly.
Two, even if they were open to deploying the new software, there were powerful system integrators (SI) to contend with. Like IBM, HP, Accenture and Cap Gemini. They make huge sums of money writing, integrating and managing software solutions for operators. If July Systems got into the game, the same thing could be had at one-fourth the cost. So, on the few occasions when July actually landed a deal, the incumbent SI would force it to embed new features into its existing solutions running within the operator network. This crippled the flexibility of July’s product and prevented customers from seeing its true value.
It was clear survival would not come without drastic changes. In 2006, 10 years after he had started his first company, five years into his second, Reddy started putting together his third business model.
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